When It’s Okay to Walk Away from Some Potential HOA and Condo Clients
“Do I lower my prices, or do I walk away?” It’s a question you’ve probably asked yourself in every pitch you’ve made to a prospective community association board. Sometimes it’s because you see a lot of potential in the board, and you’re willing to take a little hit today for long-term success. But sometimes you hit a point where you realize that the people interviewing you could potentially be difficult to work with, and on top of that they’re clearly unhappy with your pricing model. And now you’re stuck at a crossroads.
In business, you often find that the majority of aggravation you get comes from a very small percentage of your clients. Somehow it’s always the ones who ask the most of you that appreciate your efforts the least. The community association management industry definitely has this problem, and it stems from the fact that boards of directors will usually prioritize price over value.
Now the ideal business negotiation is a pretty well-known dance: there’s some tempered back and forth, one side says, “I can’t lower my prices!” The other says, “well you’d better!” Each side gives, each side takes, and both sides walk away feeling like they mostly got what they wanted. Unfortunately, this happens less and less because of very aggressive downward pressure on pricing. So one side feels taken advantage of, and after enough dissatisfaction on both sides, the contract is eventually terminated. It’s a vicious cycle that nets almost nothing of value.
Do Your Homework Before You Send a Contract
I was once at a CEO conference with owners of management companies, and they had a well-versed economist review the state of real estate from an HOA perspective. One comment that he made stuck with me: if I’m going to lower my prices for everyone who asks, I might as well just sell my management company.
He wasn’t wrong.
Whether you have decades of experience or are just starting out, the worst thing you can do is take in any business at any price just to score a win.
My advice is to do your homework before you go into an interview with a new community association. Sure, they’re seeing if you are a good fit for them but are they a good fit for you? Do they have healthy reserves or any reserves at all? What about a uniform collection policy? Has the board of directors changed at all in the last five years? Not all boards make for quality clients, and it’s important to remember that during every sales pitch. A win can make you feel great, but if it nets losses in the long run, it wasn’t really a win at all.
How to Recognize a Healthy Community
In the half-century I have spent in business, some of the best deals I ever made were the deals from which I walked away. But knowing when to walk away can be difficult. When considering a prospective community association, make sure the board has the following:
- A proper, up-to-date reserve study and (hopefully well-) funded reserves
- An honest budget that accounts for new inflation rates
- Proper insurance coverage and reasonable deductibles
- Public decision-making processes. When the board is making decisions, they need to do so in the light of day and notice a meeting. Open meetings allow owners to see what is going on and voice their opinions in an open forum.
- Trust in their community manager–they need to let the professional do their job.
A Bad Client Can Cost More Than Any Lost Business
So the next time you find yourself interviewing a prospective board and see that they are not acting in the best interests of the community, it’s okay to walk away. Yes, it hurts to lose a sale, but it hurts (and costs) more to have your office inundated with problems like delinquencies, lawsuits, and unhappy owners. It hurts and costs more to have that contract terminated entirely in the end.
Remember that you and your staff will take the heat when something goes wrong due to the board’s poor choices. If you are going to put your heart and soul into a project, choose to work with clients who will work with you and support a culture of community that is based on value, not price.